Apple’s ‘death cross’ could resurrect stock

Apple Inc.’s 6.4% slide on Wednesday was its worst daily showing in almost four years, according to S&P Dow Jones Indices, and marks the third time in nearly six months that the shares have slipped below $550.

But what’s really got traders and technicians going is Apple’s
descent into the maw of the so-called death cross — when a stock’s 50-day moving average falls below its 200-day moving average. Read more: 5 downside catalysts for Apple.

Apple is approaching the death cross, which has happened to its stock five times since November 2000, according to Collin Monsarrat of investment research firm Birinyi Associates Inc.

Yet the reports of the death cross are greatly exaggerated, Monsarrat said.

While Apple’s stock has tended to struggle over the month following the cross, the shares have been up after three months, outperforming the Standard & Poor’s 500-stock index
60% of the time. Monsarrat noted similar upside in shares of IBM
and Google Inc.
when the death cross has hit those stocks.

“Looking at these occurrences the data is fairly inconclusive but if it shows anything it is that a death cross implies better performance going forward,” Monsarrat wrote in an investors’ bulletin published late Wednesday.

He added: “The warning about a ‘death cross’ occurring should at the very least not be taken as a bad omen for future performance.”

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